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Raising VAT May Fund NHI
| News by Staff ReporterThe NHI may be partially funded through higher VAT rates
The South African government is investigating the option of raising value-added tax (VAT) in order to help fund the proposed National Health Insurance (NHI) scheme.An increase in VAT, according to Treasury chief director of economic tax analysis and tax policy, Cecil Morden, “could be justified on efficiency grounds.
He was speaking at the Government Employees’ Medical Scheme annual meeting.
The current VAT rate in South Africa, at 14%, is “relatively low when compared to the worldwide average of 16,4%,” Morden said.
It was still important to keep a balance between taxes, he said, but added that “a consumption tax is less distortionary” than other taxes and also has a “relatively broad base” [of taxpayers].
VAT “ensures that those who manage to escape the income tax net pay some tax,” he said.
He added that VAT did not negatively impact on savings or on the cost of employment.
Four means of funding for the NHI had initially been proposed by the Treasury, including partnerships with the private sector, mandatory employer contributions, user charges and tax.
According to chief director of communications for the Treasury, Bulelwa Bonqwana, “No decision has been made on which option or combination of options will be implemented.”
In August when a green paper for the NHI was released certain groups expressed their concerns about the role of private sector healthcare in the document.
“In particular Cosatu is totally opposed to the proposal to introduce a multi-payer system, under which private medical schemes will be allowed to charge the government for a proportion of the treatment they deliver to their clients,” said Cosatu.
“This flies in the face of the African National Congress’ commitment to create a publicly administered and publicly funded National Health Insurance Fund, which will be a single-payer fund that receives funds, pools resources and purchases services on behalf of the entire population.”
Source: www.bizpremises.co.za
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